Introduction:
If you're a business owner operating within the United States, it's crucial to be aware of the recent changes introduced by the Financial Crimes Enforcement Network (FinCEN), a part of the US Department of the Treasury. Effective from January 1, 2024, the Beneficial Ownership Information Reporting Rule aims to enhance transparency and curb money laundering and fraudulent activities.
Disclaimer:
Before we dive into the breakdown of these requirements, it's essential to note that the information provided here is for guidance purposes only. It is not legal advice, and you should consult with a legal professional to ensure compliance with FinCEN regulations.
Key Requirements:
The following is a simplified guide that helps you with key requirements and information to stay in the know.
1. What is Beneficial Ownership Information (BOI)?
Beneficial Ownership Information refers to identifying details about individuals who directly or indirectly own or control a company. This includes information such as names, dates of birth, addresses, and identification numbers.
2. Reporting Obligations:
Who needs to report?
Business entities that filed with secretary of state, such as LLCs, S-corps, and corporations, with at least 25% ownership or substantial control.
Sole proprietors do not need to report unless they filed with secretary of state (see FinCEN regulations for more information).
When to report?
Existing businesses (pre-2024) have until January 1, 2025. If you’ve created your business prior to 1/1/2024, you’ve got some time, but don’t forget!
New businesses created in 2024 have 90 days to file.
After 2025, new businesses have 30 days to file.
Updates (e.g., new business owners, new business names, changes in identification information) must be reported within 30 days.
How Often?
Currently, you only need to file the beneficial ownership information once. If you have any changes or updates to the previously reported information, then you complete a new BOI as necessary.
Is there a cost to file?
There is no fee to file the report. However, if you fail to file then there are violations and penalties (noted below).
3. Filing Process:
You can file either electronically through FinCEN BOI E-Filing website in PDF or web format.
No need for an attorney or CPA; any authorized individual can file on behalf of the company.
What is being filed?
The BOI information pertains to your business information such as the name, fictitious name (dba), and address. Additionally, will ask for details about the beneficial owner or individuals that significantly control the business such as name, date of birth, and address. There may be more information required, but this is the basic information of what you may see requested.
4. Access to Information:
Accessible by federal, state, local, and tribal officials, and certain foreign officials for national security, intelligence, and law enforcement.
Financial institutions can access with consent in certain circumstances.
5. Exempt Entities:
Currently, there are 23 entities deemed exempt from the rule. The entities apply more to financial institutions and government entities. Below are a few types of entities that are exempt from reporting:
Securities reporting issuer.
Governmental issuer.
Banks, credit unions, and depository institutions.
Many others (see the full list on the FinCEN website)
6. Violations and Penalties:
Fines of up to $500 per day for non-compliance.
Possible imprisonment up to two years and a fine up to $10,000 for willful failure or false reporting.
7. FinCEN Identifier:
Not required but can be used in place of a personal identifier, if so choose. Please read the FinCEN website for more information on the identifier.
A unique number that can be requested and received upon providing specific information to FinCEN.
Conclusion:
Staying compliant with FinCEN's Beneficial Ownership Information Reporting Rule is crucial for protecting your business against financial crimes. Keep abreast of the deadlines, follow the reporting guidelines, and remember that accurate and timely reporting is not just a legal requirement but a key step in maintaining the integrity of your business. For detailed advice tailored to your specific situation, consult with a legal professional.
Please review the FinCEN website directly or reach out to a legal professional to confirm how the ruling affects your business and for any changes that may occur after the writing of this post.
For your convenience, a link to the FinCEN BOI website Beneficial Ownership Information Reporting | FinCEN.gov that you’ll be able to find FAQs, how to file, exemption qualifications, and file your BOI.
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